Finance Company and Finance Unit – Section 2(40)(E)(I) | Income-tax Act, 2025 vs 1961

§ 2(40)(E)(I) · Income-tax Act, 2025

Finance Company and Finance Unit

ITA 2025 · 2(40)(E)(I) ITA 1961 · 2(22) Expln 3(c)
Definition — Section 2(40)(E)(I)

Have the same meaning as assigned in regulation 2(1)(e) and (f) of the International Financial Services Centres Authority (Finance Company) Regulations, 2021. A Finance Company is a financial institution separately incorporated within an IFSC to deal in permissible financial activities, which does not accept public deposits and is not registered as a Banking Unit. A Finance Unit is a financial institution set up as a branch within an IFSC to deal in permissible financial activities, which also does not accept public deposits and is not registered as a Banking Unit. Both must be set up as a global or regional corporate treasury centre for treasury activities or treasury services under the 2025 Act's additional condition.

Act Comparison
Income-tax Act, 2025
2(40)(E)(I)
Finance Company and Finance Unit
Income-tax Act, 1961
2(22) Expln 3(c)
Finance Company and Finance Unit
Key Points
  • Maps to Explanation 3(c) to Section 2(22) of the 1961 Act
  • Relevant for group financing transactions and deemed dividend exceptions
  • Intra-group lending by finance companies/units may be exempt from deemed dividend
💡 Practical Note

Finance Companies and Finance Units are IFSC-registered entities — typically multinational treasury operations set up at GIFT City. Intra-group loans between such entities and their overseas group companies are excluded from deemed dividend treatment, making GIFT City attractive for group treasury centralisation.

Published by Simplified Tax India — Clear, section-wise comparison of Income-tax Acts. ← Back to Section 2 Definitions Table
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